NEWS / Foreign Exchange

US CPI to Give Direction

Yesterday the US PPI came out well above consensus along with our expectations, but the Philly Fed and Empire Manufacturing disappointed, sending the EURUSD above 1.3260. CPI today at 12:30GMT is key.

Overnight News Bullets

• GE CPI MoM/YoY (Feb F) out at 0.4%/1.6% as expected.
• FR Non-Farm Payrolls (4Q F) out at 0.2% as expected.
• SW Unemployment Rate (Feb) out at 4.8% vs. 5.0% expected.
• NO Trade Balance (Feb) out at 25.3B vs. 26.0B expected.
• E-Z CPI MoM/YoY (Feb) out at 0.3%/1.8% as expected. Core CPI out at 1.9% vs. 1.8% expected.
• US PPI MoM/YoY (Feb) out at 1.3%/2.5% vs. 0.5%/1.9% expected. Core PPI at 0.4%/1.8% vs. 0.2%/1.8% expected.
• US Initial/Cont. Jobless Claims out at 318/2538 vs. 328/2576 expected.
• US Empire Manufacturing (Mar) out at 1.9 vs. 17.5 expected.
• CA Manufacturing Shipments MoM (Jan) out at -2.1% vs. -0.5% expected.
• US Net Long-Term TIC Flows (Jan) out at $94.7B vs. $70.0B expected.
• SZ SNB 3-Month Libor Target Rate 25bp higher at 2.25% as expected.
• Norwegian Deposit Rates 25bp higher at 4.00% as expected.
• US EIA Natural Gas Storage Change at -115 as expected.
• US Philly Fed (Mar) out at 0.2 vs. 4.0 expected. 0.6 prior.
• JN Tertiary Industry Index MoM (Jan) out at 1.6% vs. 1.1% expected.
• JN Coincident Index (Jan F) out at 45.0% vs. 60.0% expected.
• JN Leading Economic Index (Jan F) out at 40.9% as expected.
   

Markets

• FX: USD taking a big hit lower on weak figures.
• Fixed Income: Bunds higher, but have dropped o/n, 10yrs lower. JGB??™s a tad lower.
• Stocks: Europe gained around 2.0 pct. US higher. Nikkei down 0.7 pct
• Commodities: Precious metals higher. Crude lower, below $60.5/bbl.
   

O/N Data Heat map

Calendar

Today's Highlights:

This and Next Week??™s Highlights:

What's going on?

• Today??™s CPI figures are very important. A low reading would suggest a weakening US economy and add to the recent worries about a subprime spill-over effect.
• Our Index of Weekly Economic Indicators is about to make new highs ??“ primarily due to supportive monetary figures and strong weekly chain store sales. A high reading would reinforce the bullish case for the US rate outlook.
• FX: Anything can happen, but on a lower than expected reading of US CPI, we expect EURUSD in 1.34 shortly.
• Fixed Income has lost momentum and a turnaround lower is not unlikely. That would be JPY bearish.
• Has the market talked enough about subprime spill-over? Financial stocks with subprime exposure are being picked up...

FX